Old 401s/403s and savings

So after reading a bit of the threads here i've decided to get my finances in a bit more of an orderly condition.

What do you guys recommend for old 401k/403b/etc. accounts at old employers? Wife and I both have one sitting there looking lonely. I'm looking into just chucking them into a Roth IRA but wasn't sure if that's the best thing. Suggestions?

a more interesting question at least for me; What do you guys do with marked savings such as car savings/trip savings? That type of thing? as of now it all just sits in my checking account but i wonder if there's a better place. my checking account pays no interest nor does my wife's. we both have savings accounts already but so far it's just for oh shit money and not for saving for something specific. we've got a bit of money saved for a 5yr anniversary trip and some car funds/etc that i just don't know what to do with; if there's anything better than just letting it sit that is.

of course we're also going to start budgeting a little better. we live pretty cheap and have savings each month. just figured it's time to do a little financial house cleaning.

Roll the old 401ks into a fidelity or vanguard IRA. It's quick and painless.

For the marked savings, I'd consider siphoning off a monthly $$ amount into a new online MMA (again, fidelity or similar) such that you are liquid, but have some options as to what to do with the money. Plus, if you end up with higher amounts, it will be protected under FDIC at the separate institution. Once you achieve your savings goal, you can just write a check against the MMA to buy your car/trip/whatever.

I'm looking into just chucking them into a Roth IRA but wasn't sure if that's the best thing.

If you convert it to a Roth IRA, you'll need to pay income taxes on it. Rollovers are typically to traditional IRAs. You can certainly convert it to a Roth if you want to, depending on your tax situation.

Roll the old 401ks into a fidelity or vanguard IRA. It's quick and painless.

For the marked savings, I'd consider siphoning off a monthly $$ amount into a new online MMA (again, fidelity or similar) such that you are liquid, but have some options as to what to do with the money. Plus, if you end up with higher amounts, it will be protected under FDIC at the separate institution. Once you achieve your savings goal, you can just write a check against the MMA to buy your car/trip/whatever.

hmm. my old 403b is already at fidelity. wonder if i can just have them roll that from the employer's plan to my own ira. something to look into.

I'm looking into just chucking them into a Roth IRA but wasn't sure if that's the best thing.

If you convert it to a Roth IRA, you'll need to pay income taxes on it. Rollovers are typically to traditional IRAs. You can certainly convert it to a Roth if you want to, depending on your tax situation.

Quoted for emphasis - you could roll over to a Roth, but there would be tax implications that you should consider first. Typically, rollovers are from like to like; e.g. a 401(k) (pre-tax) would roll over to a traditional IRA (pre-tax).

As for savings, I choose not to segregate them. I have a non-tax-advantaged account that contains a mix of a money market fund (MMA) as my e-fund, and the rest in a total stock index fund and a total bond index fund. Exactly which funds I would use for a purchase would depend on how much I needed and the unrealized gains or losses on the funds. If it was a small-ish amount and I had big unrealized gains, I would probably just take it all out of the MMA to avoid capital gains, then direct all of my savings to the e-fund until it got back to normal. If I needed more than I had in the MMA, I would probably take some from each of the three areas so I didn't totally whack out my asset allocation. And that has the caveat of the tax impact too - if one fund had a loss, I would probably harvest some loss for the tax benefit, then adjust my contributions until the asset allocation was back to normal. TL;DR - I don't "bucket", I just keep it all in one place.

I'm sure you could open separate, but linked, accounts if you wanted to. E.g. you could have a completely separate account for your car fund, another one for your vacation fund, another one for your property taxes, and so on. I simply can't imagine doing it that way, for myself - it comes with big administrative overhead. Each account has its own application process, its own notifications (letters and emails), its own statements, its own tax forms, and so on.

Have you considered having it rolled into your current 401k plan? That's usually an option too.

Heh. This subject comes up so often that I'm surprised that we don't just stickie a thread about it.

Unless the new 401K has options that are ultra low cost (e.g. TSP or Vanguard Institutional) or we're talking about tiny amounts, why would you want to? An IRA is so much more flexible.

that and i don't want to mix that into this employer's 401k. i'm only putting 1% in right now since the terms are pretty bad from what i remember and it has a 5 year vestment period which i'm hoping to not hit since that would mean 4 more years here...... ungh.

that and i don't want to mix that into this employer's 401k. i'm only putting 1% in right now since the terms are pretty bad from what i remember and it has a 5 year vestment period which i'm hoping to not hit since that would mean 4 more years here...... ungh.

The vesting period only applies to the match. Your money is always yours immediately. Except in cases where you take it out early -- then a big part belongs to the IRS.

If you don't plan on being with an employer long, it makes sense to put more money in because you can then roll it over into your own IRA after separation. It's long-timers who have to decide between awful plan versus tax deductions.

Have you considered having it rolled into your current 401k plan? That's usually an option too.

Heh. This subject comes up so often that I'm surprised that we don't just stickie a thread about it.

Unless the new 401K has options that are ultra low cost (e.g. TSP or Vanguard Institutional) or we're talking about tiny amounts, why would you want to? An IRA is so much more flexible.

that and i don't want to mix that into this employer's 401k. i'm only putting 1% in right now since the terms are pretty bad from what i remember and it has a 5 year vestment period which i'm hoping to not hit since that would mean 4 more years here...... ungh.

Just because you have to be with them a full 5 years for their principal investment to become yours you still get to keep any gains their money made when you leave. The only reason not to max this out is if you have not yet maxed out your own IRA. If there is any match though I still recommend putting in up to the max match just for the free profit you get to keep from their money.

Heh. This subject comes up so often that I'm surprised that we don't just stickie a thread about it.

And the fact that it does indicates a woeful financial illiteracy on the part of many American workers. --Not a slight intended at you, sword_99mm. The fact that you're asking is a good thing. You're fixing part of the problem.

How and where to save one's money and how to manage employer contributions should not be so confounding. Shame on all the companies and/or their HR departments for not being informed and for not informing their workers about how these relatively simple laws work. And shame on them for themselves being so ill-informed that they hook up with incredibly expensive plans with shitty choices that don't serve anyone but the fund owners.

And shame on the educational system for not making IRA/401K 101 a graduation requirement.

So not to steal the thread but how does one go about finding info on an old 401k at a company that was left in 5 years ago. (I was young and stupid) Now that I am attempting to get my retirement back on track I feel I should roll that 401k over to something useful or at least to something that I can monitor more easily.

I'm not even sure what financial company it was with at this point thought I think it was either vanguard or fidelity.

The company that I worked at is still around so I guess I could call the HR dept if I had to.

Have you considered having it rolled into your current 401k plan? That's usually an option too.

Heh. This subject comes up so often that I'm surprised that we don't just stickie a thread about it.

Unless the new 401K has options that are ultra low cost (e.g. TSP or Vanguard Institutional) or we're talking about tiny amounts, why would you want to? An IRA is so much more flexible.

that and i don't want to mix that into this employer's 401k. i'm only putting 1% in right now since the terms are pretty bad from what i remember and it has a 5 year vestment period which i'm hoping to not hit since that would mean 4 more years here...... ungh.

Just because you have to be with them a full 5 years for their principal investment to become yours you still get to keep any gains their money made when you leave. The only reason not to max this out is if you have not yet maxed out your own IRA. If there is any match though I still recommend putting in up to the max match just for the free profit you get to keep from their money.

lol first world problems. i can't afford to max an ira and a 401k, but i'm looking to put more into the 401 just because. don't plan on getting any of the match though and won't roll the 403 into it unless it would make more sense than starting an ira with that money.

my wife will just go ira since her job is at a small firm with no 401k/etc.

Heh. This subject comes up so often that I'm surprised that we don't just stickie a thread about it.

And the fact that it does indicates a woeful financial illiteracy on the part of many American workers. --Not a slight intended at you, sword_99mm. The fact that you're asking is a good thing. You're fixing part of the problem.

How and where to save one's money and how to manage employer contributions should not be so confounding. Shame on all the companies and/or their HR departments for not being informed and for not informing their workers about how these relatively simple laws work. And shame on them for themselves being so ill-informed that they hook up with incredibly expensive plans with shitty choices that don't serve anyone but the fund owners.

And shame on the educational system for not making IRA/401K 101 a graduation requirement.

totally agreed. my last job was just: we give you 7% of salary if you put in 2% contribution. of course that was .gov work so i guess they don't convolute stuff as much as a company would.

here are the terms that i could find:

The Employer will make a matching contribution equal to 37.5% of your elective deferrals each Plan Year. TheEmployer will not match your elective deferrals in excess of 8% of your Compensation each Plan Year.The Plan will not match any catch-up deferrals.

to me this means i put in 1% and they put in 37.5% of 1%. am i reading that right? seems too confusing imo.

Heh. This subject comes up so often that I'm surprised that we don't just stickie a thread about it.

And the fact that it does indicates a woeful financial illiteracy on the part of many American workers. --Not a slight intended at you, sword_99mm. The fact that you're asking is a good thing. You're fixing part of the problem.

How and where to save one's money and how to manage employer contributions should not be so confounding. Shame on all the companies and/or their HR departments for not being informed and for not informing their workers about how these relatively simple laws work. And shame on them for themselves being so ill-informed that they hook up with incredibly expensive plans with shitty choices that don't serve anyone but the fund owners.

And shame on the educational system for not making IRA/401K 101 a graduation requirement.

totally agreed. my last job was just: we give you 7% of salary if you put in 2% contribution. of course that was .gov work so i guess they don't convolute stuff as much as a company would.

here are the terms that i could find:

The Employer will make a matching contribution equal to 37.5% of your elective deferrals each Plan Year. TheEmployer will not match your elective deferrals in excess of 8% of your Compensation each Plan Year.The Plan will not match any catch-up deferrals.

to me this means i put in 1% and they put in 37.5% of 1%. am i reading that right? seems too confusing imo.

If you contribute 8%, they will provide a 3% match (37.5% of 8% = 3%). If you contribute less, it decreases proportionally. So yeah, your 1% = .375% on their end.

Heh. This subject comes up so often that I'm surprised that we don't just stickie a thread about it.

And the fact that it does indicates a woeful financial illiteracy on the part of many American workers. --Not a slight intended at you, sword_99mm. The fact that you're asking is a good thing. You're fixing part of the problem.

How and where to save one's money and how to manage employer contributions should not be so confounding. Shame on all the companies and/or their HR departments for not being informed and for not informing their workers about how these relatively simple laws work. And shame on them for themselves being so ill-informed that they hook up with incredibly expensive plans with shitty choices that don't serve anyone but the fund owners.

And shame on the educational system for not making IRA/401K 101 a graduation requirement.

totally agreed. my last job was just: we give you 7% of salary if you put in 2% contribution. of course that was .gov work so i guess they don't convolute stuff as much as a company would.

here are the terms that i could find:

The Employer will make a matching contribution equal to 37.5% of your elective deferrals each Plan Year. TheEmployer will not match your elective deferrals in excess of 8% of your Compensation each Plan Year.The Plan will not match any catch-up deferrals.

to me this means i put in 1% and they put in 37.5% of 1%. am i reading that right? seems too confusing imo.

If you contribute 8%, they will provide a 3% match (37.5% of 8% = 3%). If you contribute less, it decreases proportionally. So yeah, your 1% = .375% on their end.

yup, that's what i thought.

for those of you without employer 401k, do you use roth or regular ira? if i were to roll a 401k into an ira (so no taxes at deposit) would it be smart to just keep with that ira or open a roth to deposit into from that time forward? i'm thinking avoiding future taxes would be better than present but i dunno. with DC the way it is lord knows how it'll shake out in 35-40 years. also adding more on top of the rollover would grow it faster so maybe no need for a separate account.

are money market accounts any good? looks to be like a high interest savings account with the same type restrictions. thinking about putting the 'saving for x' money into something like that and leaving the regular savings accounts for 'oh shit' times.

A money market account is basically just what you said, a high(er) interest savings account with a max of 6 withdrawals (transactions) per month. My "savings" account is a money market account with Ally bank (used to be GMAC bank) with a interest rate of about 0.85% so its not really making me any money and definitely not keeping up with the cost of living. My paycheck is direct deposited to this account. I transfer money to my checking account once a month for cash and bills that require checks be sent and my credit card automatically pulls it's bill straight from the savings account monthly. When I "buy" more funds/buy more into an existing fund in my IRA then Vanguard just pulls the money directly from my savings account. 1 transaction per fund purchase is made so be careful ordering purchases of multiple funds in a single sitting or you might go over the transaction limit for the month. I basically use 3 "transactions" a month with the occasional 1 or 2 extra transactions when I divert money into my retirement funds at Vanguard. It is also my e-fund account.

If your employer does not offer a retirement plan (401k etc) then I would recommend going to Vanguard (super low fees) and opening an account there for a Traditional or Roth IRA. Traditional can get you a tax write-off depending on your income levels and filing status otherwise I would recommend the Roth version in order to maximize your funds for the future if you meet the requirements and can afford the tax difference. Every single one of my old 401ks from previous employers are rolled into my Roth or Traditional IRA accounts so that I retain complete control and minimize my costs. It also helps me to keep track of them over time since they are all in one place. It is one of the first things I do within 90 days of changing employers as most employers have high fee funds and management companies that eat your profit and savings. In fact my current employer goes with Hartford and only allows Traditional 401k accounts and there isn't a single fund (all actively managed) in the options that has a cost below 1.15% or can touch Vanguard funds. I don't have a single fund in Vanguard that is above 0.25% in costs. Naturally when I leave this employer that money will immediately be rolled out of that broker if for no other reason than the costs are insane. I still put my money in to them for now though as it allows me to set aside additional money beyond my annual IRA limit of $5,500 which adds greatly to my total retirement savings for the year.

Some people like to keep rolling their 401k plans to their new employer. As I wrote above this can be costly depending on the new employer's plan options. A transfer directly from your old 401k into a new or existing IRA is simple and easily done. Vanguard will even help you do it over the phone at no charge and just a few minutes of your time. Just be sure to roll like into like so Traditional into Traditional and Roth into Roth and you won't incur any tax penalties. If your 401k is mixed then be sure to have the old company split the check into one for each type (Traditional/Roth) to keep things separated. You can convert the Traditional IRA into a Roth IRA later on and pay the taxes if you decide to.

for those of you without employer 401k, do you use roth or regular ira? if i were to roll a 401k into an ira (so no taxes at deposit) would it be smart to just keep with that ira or open a roth to deposit into from that time forward?

If your 401k wasn't a Roth version, and it probably wasn't given that you haven't said and that they're not as common, you roll that money into a Traditional IRA. As to whether to keep contributing there, or to open a Roth IRA and begin contributing there, another consideration is tax diversity. You can have both and contribute to both, as long as you don't exceed the total IRA limit, and that way hedge your bets as to what tax rates are going to obtain in future. There are also income level considerations and tax exemptions, too. You need to get informed about this and not just from us. Spend some time at the Vanguard site and at bogleheads.com. If you call VG and ask for them to set the rollover up for you, talk to them then about your options. You don't have to decide right away while you're educating yourself. But do get that rollover accomplished asap. Time and your allocation are your best allies in retirement planning.

Your spouse, too. If you have a good marriage and think that it's going to last, you both should be planning together strategically about asset allocation and location. For example, one of you could go heavy on equities while the other accumulates assets in bond instruments. According to the strategic mix that you decide for yourselves. This is what we did over many years and it really worked well.

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also adding more on top of the rollover would grow it faster so maybe no need for a separate account.

Again, depends on whether you want to pay taxes now (in converting) or later, when you withdrawal.

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are money market accounts any good?

They're like bank savings accounts. They don't pay much because nothing pays much these days in the "savings" world. When you open your IRA at VG, you could also open a mm account there, too, as a place to park money for upcoming expenditures. You can link it to your current checking account and set up automatic transfers, and you can get money back to your checking account from it, too. Also, VG's Prime MM account has check-writing privileges, as well. You get a book of checks, so you can use those for your spending needs if you have project or a new roof or something down the road.

I'm sure you could open separate, but linked, accounts if you wanted to. E.g. you could have a completely separate account for your car fund, another one for your vacation fund, another one for your property taxes, and so on. I simply can't imagine doing it that way, for myself - it comes with big administrative overhead. Each account has its own application process, its own notifications (letters and emails), its own statements, its own tax forms, and so on.

Some banks allow you to just create sub-accounts with basically no effort (ING Direct did, not sure if Capital One 360 still does). If you think having the money in a separate account would be useful to you, that might be worth looking into.

I'm sure you could open separate, but linked, accounts if you wanted to. E.g. you could have a completely separate account for your car fund, another one for your vacation fund, another one for your property taxes, and so on. I simply can't imagine doing it that way, for myself - it comes with big administrative overhead. Each account has its own application process, its own notifications (letters and emails), its own statements, its own tax forms, and so on.

Some banks allow you to just create sub-accounts with basically no effort (ING Direct did, not sure if Capital One 360 still does). If you think having the money in a separate account would be useful to you, that might be worth looking into.